It turns out somebody should have watched the State of the Union speech. Obama proposed yet another bad, Soviet-style, central planning program to fix the economy.
At a closed-door meeting between President Barack Obama and House Democrats, [Michigan Democratic Rep. Dan] Kildee introduced himself as a freshman, to which Obama said, “Wow, you’re really classing up the place then.”
Kildee then proceeded to ask what one person described as a somewhat “long-winded” question about the importance of creating jobs for his economically distraught district.
“I can tell you’re a freshman because you didn’t pay much attention to the State of the Union,” Obama joked. “I talked about that.”
Amid the resulting laughter, House Democratic Caucus Chairman Xavier Becerra of California then offered to provide Kildee a printout of the speech.
Obama was referring to his $1 billion proposal for 15 manufacturing “innovation centers,” the details of which are still somewhat hazy.
Because nobody does innovation like federal bureaucrats.
Weren’t there about 15 districts in The Hunger Games? One Innovation Center for each of them. How convenient.
Sounds like Kemp’s Enterprise zones. Good conservative policy then, socialism now. (No one knows the details for these zones, so really it is too early to know what they are.)
Steve
You really can’t see the difference between lower taxes encouraging private enterprise in “enterprise zones” and federally-funded, government-staffed “Innovation Centers?”
He doesn’t want to see it. Steve’s special intellectual honesty sauce.
Yes. The funded program is more transparent. It costs taxpayers the same amount of money. It is very difficult to eliminate tax expenditures once started. Much easier to cut spending or eliminate programs. As designed, once running, industry is supposed to maintain the program.
http://www.themanufacturinginstitute.org/Initiatives/Manufacturing-Innovation-Centers/Manufacturing-Innovation-Centers.aspx
Steve
W.C.: http://www.themanufacturinginstitute.org/Initiatives/Manufacturing-Innovation-Centers/Manufacturing-Innovation-Centers.aspx
http://www.georgia.org/business-resources/Pages/georgia-centers-innovation.aspx
Good idea or not–I’m no expert–none of this sounds like totalitarian or socialist “central planning” to me. Tax incentives are also known as “tax expenditures,” and I’m not sure why it matters so much whether businesses get direct government funding or indirect funding through lower taxes; maybe it matters, but it doesn’t strike me as in any way a huge difference. And I have no idea how many government staffers the Innovation Centers will require, but then I have no built-in bias against government workers either(some of my best friends etc.).
I didn’t see The Hunger Games but have some vague notion of what it was about–but I don’t get your “How convenient” remark; is the number 15 now guilty by association? Would you feel better if Obama established 16, or 14, Innovation Centers?
“I’m not sure why it matters so much whether businesses get direct government funding or indirect funding through lower taxes”
It makes all the difference in the world. Lower tax rates across the board are available to all and allow the market to choose the best producers. Direct government funding goes to the politically connected and leads to corruption and crony capitalism (see Solyndra, Fisker, AIG, Goldman Sachs, Beacon Power, etc.).
W.C.: You may be right, but I remain unconvinced that the distinction is quite so neat, at least if we’re talking about Enterprise Zones vs. Innovation Centers; if you’re simply talking about “lower tax rates” across the board as a general proposition, that’s a different issue. Crony capitalism is always a problem, but that doesn’t mean that all “direct government funding” is thus contaminated. From an entirely cynical perspective–which I don’t happen to share–one could argue that the “politically connected” control everything that government does, from allocation of funds to design of the tax code to appointments to office to who gets elected in the first place. I choose not to see it that way, but I’ve been known to be wrong.
This would be tax expenditures for those using the innovation center, i.e., the politically connected.
Steve
General Electric’s been re-opening plants in Kentucky. They’ve found it’s now cheaper to build some products here. If you want jobs in the U.S., simply create an environment conducive to business as opposed to one of the highest corporate tax rates in the world. (Which some companies don’t pay because of crony capitalism running rampant in D.C. right now.) States and localities frequently give companies tax breaks because they know they’ll make up the revenues via taxing employees, related businesses, and their clients.
US corporations actually pay less in tax than the OECD average. Given that they can manipulate their pre and post numbers that are subject to tax, the best measure is tax that they actually pay, and express it as a percentage of GDP so you can compare with other countries. In the US, corporations pay tax equivalent to 1.9% of GDP. The OECD average is 3.5%. US corporations pay so little in taxes that we really should just eliminate the corporate income tax.
Steve
Exactly. Another situation of corrupt crony capitalism where lobbyists buy loopholes and subsidies.
Close all the loopholes and lower the rates.
Which is why I referred to crony capitalism, which W.C. also points out. Yes, we should “just eliminate the corporate income tax.” As many conservatives point out, corporations don’t pay taxes, people pay taxes. I assume you can deduce why that statement is true.
Steve: I believe you are not allowed to bring actual numbers into this discussion. Numbers have been shown to have a liberal bias–please refrain from using them.
I read a lot of econ sites. In general, conservatives talk theory absent numbers. Not always, but mostly.
Steve
Steve, Jack, let me give you a helping hand here. The numbers are always right-wing.
“Effective Average Tax Rates. Our analysis finds that the United States’ performance in the global economy does not look much better when scored with EATRs than when scored with the top statutory tax rates. The kernel densities show that the United States has moved far to the right of the mode of the OECD distribution. Or, more accurately, the OECD has moved to the left (see figure 3). In 1996, the United States’ EATR was slightly below the OECD average, 29.2 versus 30.2. In later years, the OECD average improved by almost 10 percentage points to 20.6 while the United States’ EATR remained relatively unchanged. In 2010, the US EATR was 29 percent.”
http://www.aei.org/article/economics/fiscal-policy/taxes/report-card-on-effective-corporate-tax-rates/
In short, Steve, you made a claim which is contrary to the well-known facts. Jack, I suggest you check every Steve’s, because he has a well-known tendency to blindly repeat left-wing propaganda without checking the facts first.
H-A. You keep talking rates. If you exclude a lot of profits from taxes, you can affect the tax rate. I think you are better off measuring what tax they actually pay. That eliminates all manipulation to hide income. By that measure, normalizing it to GDP, corporations in the US pay less than the OECD average. So, you misread what I wrote, and have chosen an inferior way of measuring tax burden. Rates are pretty meaningless. (I read that particular piece long ago. I think it helped that I knew that corporate revenues had been decreasing as a percentage of our overall revenues for a long time. If effective tax rates are staying steady, but the amount they are actually paying, both as a percent of GDP and a percent of total revenues, is falling, you need to look a little further.
Steve
My good Jack,
That’s why you are here. We had run out of Authors who would still take our good Steve’s source-free numbers and his simple, opaque, authoritatively declarative, explanation-free statements at face value.
H. M. Stuart
Alexandria
H.M.: Thank you. I’d been wondering why I’m here. I’m glad I can be of use.
Steve avoids addressing the issue by coming up with a set of numbers that ignore the facts of the base corporate tax rates and crony capitalism. If anything, he’s pointing out the high level of corruption in our government and politics. None of which matters until a Republican is president.
Hyphenated American: Thank you for the link and for the numbers. In turn, allow me to direct you to
http://www.bloomberg.com/news/2013-01-22/as-foreign-profits-rise-corporate-tax-rates-fall.html
The Bloomberg article claims EATR in the U.S. have been around 19% for the past three decades, and dropped to 13% in the last quarter of 2012. That obviously is a large difference from the 29% which Kevin Hassett at AEI claims. I wish I were an economist so that I could resolve their dispute, since they both claim to be talking about the same thing but produce such wildly disparate numbers.
(Steve’s figures regarding corporate taxes paid as a percentage of GDP seem in line with what the Bloomberg article claims; I didn’t notice the figure given for that at AEI.)
I’m not sure how we went from Innovation Centers and “central planning” to corporate tax rates, but I’m sure it all fits together. (I was going to make a joke comparing “central planning” to “central heating” and “central air,” but decided against it; you probably wouldn’t think it was funny, and if DADvocate were to read it, he’d accuse me once again of being flippant and frivolous.)
“(Steve’s figures regarding corporate taxes paid as a percentage of GDP seem in line with what the Bloomberg article claims; I didn’t notice the figure given for that at AEI.)”
Jack, we are going to have an issue unless you start paying attent. The link IO gave you talked about both – corporate tax rate and the corporate tax as share of GDP. US taxes are higher for corporation, and thus the tax revenue from the corporate tax is lower. It’s all shown in the article I linked. Let me quote:
“Any discussion of tax rates is incomplete without an analysis of trends in corporate tax revenues. With the US corporate tax rates so high, one might expect the share of revenues from corporate capital to be higher in the United States than in other OECD economies. This is not the case, however. As figure 5 clearly shows, except for a brief period in the 1990s, US corporate tax revenues have been consistently lower than those of the OECD economies.”
In short, US corporate tax rates are higher, and revenue is lower than in OECD. This is consistent with supply side economics.
Hyphenated American: I apologize for trying your patience. You are indeed correct that the revenue- to-GDP numbers were in the AEI article; as I say, I’m not an economist, and I kind of get that “MEGO” thing going when I try reading a longish article on economics, all dotted with charts and graphs and numbers and what not. In any case, the figure in question agrees with both Bloomberg and with Steve, so no problem there; now, the question is, why don’t Bloomberg and AEI agree on the EATR? I note that you didn’t respond at all to that part of my reply to you, nor to my concluding statement about taxes as a general issue. I realize you were probably too exasperated at my having missed Kevin Hassett’s reference to revenue-to-GDP, but it seems a bit odd that you scold me for that and yet give no indication that you even read the link I provided you.
Jack, The guy who wrote an article for Bloomberg was a well-known Obama’s guy. If you look at his article more carefully, you will notice that it does not actually support what Steve claimed. The reason for this is quite obvious – Peter looked at the taxes paid by the US corporations, while both Steve and AEI compared corporate taxes for US and OECD companies. Peter could have defined corporate taxes as he pleased, and thus arrived at 19% – but that number cannot even be directly compared with AIE numbers, because they could have used very different definitions of the tax rate.
In short, AIR numbers are perfect when you want to check Steve’s claims, while Peter’s numbers are useless.
“I realize you were probably too exasperated at my having missed Kevin Hassett’s reference to revenue-to-GDP, but it seems a bit odd that you scold me for that and yet give no indication that you even read the link I provided you.”
I’ve read it, but decided to ignore it because it cannot be used to compare corporate tax rates of different countries – it only looked at US. I guess I owed to explain this to you. But then again, it’s fair to note that you openly misread the article I quoted, while I simply decided not to note that your article was useless to this discussion. My apologies.
“In short, US corporate tax rates are higher, and revenue is lower than in OECD. This is consistent with supply side economics.”
This is consistent with tax lawyers finding ways to hide income, but ok, I will bite. Let us use my idea, reduce the rate to zero, and we will have a lot more revenue. Hell, lets cut all tax rates to zero and we will be rolling in revenue.
Steve
“This is consistent with tax lawyers finding ways to hide income, but ok, I will bite.”
True that. But again, that would mean that corporations prefer to spend money on lawyers, and not on paying taxes. If you lower US corporate taxes to the levels in the OECD, then we can get more revenue. We can start by setting the nominal levels to the OECD average. Agreed?
“Let us use my idea, reduce the rate to zero, and we will have a lot more revenue. Hell, lets cut all tax rates to zero and we will be rolling in revenue. ”
Actually, if we cut corporate tax rates to 0, we quite may see an increase in individual income tax revenue – as well as an increase in all other types of tax revenue.
Dont get bamboozled Jack. Rates are what conservatives want to talk about when they dont want to talk about what is actually paid. I have published the list here before, and can publish again if you want or you can Google it, but many large corporations pay zero taxes. Their corporate rate is 35%. If you are pro-business, not pro-markets, you keep talking about rates. Also, dont fall for the supply side nonsense, unless they can give you the perfect rate on the Laffer Curve (LOL) where revenue is optimized. Also, it will require you to ignore all the empirical data of what really happened when rates have been cut. (I will help you out. If you cut rates, eventually revenues increase. Duh. The country grows. You just have to ignore all of the debt incurred while reaching that point, which they are quite willing to do.)
Steve
This will help. Note that corporate revenue used to equal about 5% of GDP. It is now below 2%.
http://www.americanprogress.org/issues/tax-reform/news/2011/06/10/9751/ten-charts-that-prove-the-united-states-is-a-low-tax-country/
If anyone can name any actual corporation represented in our good Steve’s tax figure as a percentage of GDP, please do so. Of course, that cannot be done, because what Steve offers are second order abstracted aggregates of particular real corporate business experience and thus represents no such actual corporate tax experience by any actual corporation.
The suggestion Steve wants to float, of course, is that, instead of rates, we should take his second order abstracted aggregate number, apply it to every corporation, and then assume that every corporation actually enjoys that same second order abstracted aggregate rate in real life. Of course it does not, which is why the highest possible rate any given corporation could actually pay really does matter, because that is where the tax law compelling any given real corporation begins its take from them. Some corporations may be able to reduce that potential legal liability by any number of differing amounts and some may not at all.
“Corporate tax attorneys hiding taxable income” is an ideological complaint, not data.
Steve likes to talk numbers, and, by golly, more power to him; it makes him feel good about himself, and that’s the only important thing involved in his numbers, that and attempting to intimidate the gullible. Just realize that such numbers do not describe any given actual individual instance of corporate tax reality, that is, those places where real business actually is and has to be conducted.
H. M. Stuart
Alexandria
H.M.: I’m no doubt over my head in this–but when you say “aggregate” are you referring to what is also called “average” (as in Estimated Average Tax Rate)? If that’s the case, then of course you’re correct–whatever the average is, it may well be that no single corporate entity pays it; but H-A also plucked EATR figures from the American Enterprise Institute, so why is Steve more culpable for his? And you’re equally right that statutory rates matter, which is why I believe President Obama has also suggested lowering the statutory corporate rate while closing loopholes.
On the other hand, if “second order abstracted aggregate” means something else entirely, then never mind the first part of the above, but maybe you could clarify for me what it does mean?
My good Jack,
I used the words “second order abstracted aggregate” to refer to the abstractedness of the phenomenon more generally and conceptually rather than employ terms with more technically restricted definitions, like “average”, but you understand me correctly.
Our good Steve is culpable because he is the one who introduced the matter and paraded what he introduced in the way he introduced it as the sine qua non of the issue. Our good H-A met him on his own ground because, as an electrical engineer, our good H-A is also fond of numbers.
Because Steve already believes corporate tax rates should be zero, the only reason he introduced the matter at all in the manner he did was to backhandedly and passive-aggressively plant the notion that his psychological nemesis, conservatives, are falsely claiming corporate tax rates are too high, that and to provide himself a stage upon which to boast about his mastery of numbers – and that he had read everything and anything conceivably relevant as well, and had read it first. If he already believes rates should be zero, none of the other had any real relevance; it was only costuming.
Because our good Steve – because he declares himself to be – must be a master of numbers, this attempt to falsely insinuate the abstractly statistical as the individual experience of corporate business must therefore be deliberately mendacious, designed solely to bluster and deceive the unwary while in the process impressing and intimidating them. Were it merely accidental or an oversight, that would betray a quantum inability on our good Steve’s part to understand the inherent limits of the numbers he declares himself to be master of. But because our good Steve is a master of how numbers determine reality, the latter simply cannot be the case.
H. M. Stuart
Alexandria
H.M.: Thank you.